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  • Writer's pictureThe Solar Journey

Episode #015 - Mario Schirru

Updated: Aug 5, 2022

Episode #015 with Torsten Brammer & Mario Schirru:

In episode #015 of The Solar Journey podcast, Dr. Torsten Brammer speaks with Mario Schirru. Mario Schirru has been in the renewable energy business since 2008 when he started his career as a Project Developer for GEO mbH. Five years later, he moved to Germany and started working as an Investment Manager for Capital Stage AG, now Encavis AG.

In 2015 he was appointed Investment Director and took over the responsibility for the company's investment activities. Finally, in 2019, he became responsible for the Operations Team. Mario holds a Bachelor's degree in Mechanical Engineering, a Master’s degree in Control Engineering (both from the University of Pisa), and an MBA from Mannheim Business School.

Show Notes:

  • 29:10 - 31:34 The portfolio is more than the sum of its single assets. Mario Schirru, COO at Encavis AG, explains how the portfolio of renewable energy will develop in the future.

  • 31:36 - 34:40 The sun does't shine at night, even in Spain. That's a fair point! Learn how this is managed by a supplier of renewable energy, like Encavis AG. Torsten Brammer and Mario Schirru have a look on the solutions.

  • 53:30 - 56:46 What happens to outdated solar modules? Mario Schirru, COO at Encavis AG and Torsten Brammer talk about a very important aspect of the PV industry in the future.


[00:00:04.450] - Torsten

So welcome everybody, to another episode of The Solar Journey. My guest today is Mario Schirru. Welcome, Mario.

[00:00:16.250] - Mario

Okay, thank you. Pleasure to be here today.

[00:00:20.210] - Torsten

You're welcome. So Mario has been in the renewable energy business since 2008. That's when he started his career as a project developer in Italy for a German windpark developer, GEO. And five years later he moved to Germany and started working as an investment manager for Capital Stage, which was later then renamed and rebranded as Encavis. He's still with Encavis, where he was appointed Investment Director in 2015. And he then took over the responsibility for the investment activities. And in 2019 he became responsible for the operations team. His background is in mechanical engineering. He's got a bachelor's degree in that, and a master's degree in control engineering. And he also got an MBA from the Manheim Business School, which is a business school in Germany. So Mario, you cover both sections or two sections that's engineering and also finance. From your CV, it seems like you're switching forth and back. So you've got two big hearts for those, let's say two different sections. How do you balance that? What tricks your initial interest in engineering and then your initial career was then also in the investment section?

[00:01:59.430] - Mario

Yeah, that's a good question. When I started looking at renewables as an industry, I was sort of just finished high school or university and I really was still very much looking for technical activity and technical job. And because I liked what I've done at university and the topics full of the challenge of solving problems was very attractive to me. And it was in the end sort of by a coincidence that I started working as a developer where I thought that the technical skills would have been more important than in the end turn out to be. Because it's really a lot about relationships. And when you start a new project and you try to convince all the stakeholders, landowners, municipalities, and authorities to support the initiative, yes, of course you have to present an argument and convince them with numbers and figures and everything. But in the end you have to also convince them that it's a good thing. And I think that most of the people in the end still are convinced by emotions. Once the figures are right, there is something else that brings them over the finish line. And I think this was sort of something I learned during that five years, five years that have been very interesting because I really got the chance to look at many different things, basically, again, from the technical ones to more things more connected to planning issues, which again, I was not really prepared for because there is a shift into legal aspects that was new to me, more financial, of course, because we had to understand how the plan would work out.

[00:04:20.720] - Mario

And I also had the chance to interact with a lot of different people ultimately also the local politicians and also central politicians in our case, played a role. And it was great to discover this whole new world and to find a way to manage these projects. And after five years of intense, I would say also fights, I think I can use that work with local authorities and bureaucracy. I understood that I would have loved to change a little bit my role, and that's when I moved from the developer into the investment activities, I was offered this opportunity by Capital Stage. The company was quite small, but I had a great drive, great people, a great team, and we managed them to grow the business. And the sort of the last switch to the operations happened when we realized that the portfolio had grown to a significant size and that we basically would not only need to continue growing, it building up, but we would also need to sort of harmonize it to create something that is not a sum of individual projects, but it's a real portfolio. And I think this has been my work for the last three years.

[00:05:54.690] - Mario

I think we are now really understanding the power of a portfolio, which is not the sum of single assets, it's something more.

[00:06:04.850] - Torsten

Okay, excellent. We'll come back to that later when we talk about in detail. I like to understand that when you talk about the portfolio and that it's more than the individual sum. Cool. But what made you move initially to move into the solar and wind industry? I saw in your CV that you had an internship with Ford, the Motor Company, right. In your very initial internship, only a few months, but still you look into, let's say, the conventional, let's say at least back then, industry, before you then moved into solar and wind.

[00:06:43.210] - Mario

Definitely as a young student of mechanical engineering, I think everyone dreams of getting into the automotive industry, and that was my dream back then. But then life sort of told me something else and again, I discovered the industry a couple of years later. I definitely think it has been the right decision for me. I think that this industry is simply great. There's so much to be done and it's really something which is one of the industries for the future, I think. And of course, mobility will play a role. We'll go substantial changes, we're going to go substantial changes because everything will change also. There somehow, maybe things will even converge. The electrification of mobility is a fact. But yes, I basically chose the other way. Again, the way things are in life, sometimes they happen because they simply have to happen. And in that case, I think it went like that.

[00:08:04.470] - Torsten

Was there a special event which triggered that or how did it happen?

[00:08:13.310] - Mario

It was the consciousness about climate change, I would say. The fact that we had to do something for our planet. I had the chance to, or I was lucky enough to go to the German school in Rome where the topic around climate and sort of sustainability were addressed fairly early. Also, let's say in the year 1995, this was already a topic when when it still was not a mainstream one. So I remember again we had the German school in Rome being sort of sensitive to some topics that are not really easy to find in mainstream media.

[00:08:57.830] - Torsten

Excellent. So let's talk about the maybe you want to line out what Incavus is doing. So it's easy to read up on the internet, but in your words, what is Encavis doing? What do you propose to your customers? What's your core business and your business model?

[00:09:17.970] - Mario

Our core business is that we are an operator of wind and solar plans and we are not a developer. This is, I think, an important one. We have a quite prudent approach to energy and to business. We think that the stability is one of the things that our shareholders care most about. And maybe, I think maybe in this sense it's important to reflect or to present the history of this company because the company was really active as a private equity investor in clean tech until I would say, 2008 when the financial crisis sort of opened the eyes on many things, among which the volatility and sort of the risk of certain investments. And during that year the board, the management team decided to invest into a much more stable asset class in a much more stable business which was given by the subsidies by subsidized renewable assets. I joined the company in 2013. But even back then the energy was not really the key point or the most important driver. It was really the stability of the business plan, of the business case of the consciousness about the fact that we are ultimately producing energy, came some years later when we realized that the portfolio and we will talk about that later when we realize that the portfolio has grown to an important size.

[00:11:29.710] - Mario

And moreover, this also sort of made us very clear that we have to grow the portfolio even more in order to play a role in the energy market, in the energy business. Because energy business is about scale. In the end, this is basically this and somehow we still have this DNA of a conservative approach to things. Again, development is where everything starts but it's also a business which is fundamentally different than operating the assets. We've decided to focus ourselves on a certain segment and we produce energy. We have our first clients we deliver the energy to, particularly Amazon is well known in Spain. One of our biggest plants supplies energy to AWS and this is what we do.

[00:12:36.370] - Torsten

So when you say your operator, it's it's you own and run the wind farms.

[00:12:43.820] - Mario

That's correct. That's what Encavis AG does.

[00:12:46.810] - Torsten

We also have so you buy them.

[00:12:50.220] - Mario

From an EPC, from developer at a late stage when basically all the authorizations have been granted and so the plan can be built. Then we basically construct we build it through an EPC, which we appoint very often. We still buy the plans once they are operational and have been sort of built by the developer, financed, and we just take them over and include the mail portfolio.

[00:13:27.550] - Torsten

Okay, so it's two ways. You either buy the rights for a, let's say, readily designed and authorized project, or you buy finished wind parks. Do you also invest into solar parks or is it wind?

[00:13:43.580] - Mario

Of course, yes. The solar part is the biggest part of our portfolio. We try to have a balance, something like 75% of solar and 25% of wind. In terms of capacity.

[00:13:58.930] - Torsten

Is there a strategy behind it or does it just happen, the ratio of solar and wind?

[00:14:04.210] - Mario

Well, there is a strategy because we think that it gives a well balanced cash flow over the year, first thing. So in the summer, of course, we make a lot of energy through the solar plant. In the winter it's more the wind part, which sort of drives the numbers. But in general we believe that it's a good mix. Also in terms of a supply of energy, if you put the curves above the other, you end up with a very nice profile in terms of output. So we believe that it's a good mix. Again, we don't have to follow it dogmatically, but we feel very comfortable with that.

[00:14:52.700] - Torsten

Okay, I know that Capital Stage, so the previous name of Encavis, they were also invested into tech companies, like one of those thin gem silicon module producers in Berlin, which was kind of a technology bet. And then you just described it that Encavis decided to go into more secure financing schemes, which is now the back then it was the subsidized wind and solar farms where the safe investment was pretty exactly what's the investment required. On the other side, you knew exactly through the guaranteed subsidies how much money you would earn over time. Right. So that's the first move. And then now it seems that you describe like a third phase where it's not about the subsidies, but you talk about you as an energy producer. Is this where, let's say the business to business, the private energy transaction comes in? Is that what you mean by you as an energy producer? It does depend on the subsidies, yes.

[00:16:13.760] - Mario

I think the old industry is sort of going in that direction for different reasons. I think we have proven that the technology is mature and can be sort of adopted without the need of subsidies because it's sort of self sustaining. The technology costs went down significantly. We are the cheapest form of energy. So in the end, this is a trend which brings this industry to the point where it does not really need subsidies anymore. It will be interesting to see how the whole game about battery is going to play out because there we see it is still more difficult to find really long term agreements which are necessary for the financing. But this is something else, we can touch base on that later. In general, yes, we are ready to become a supplier of energy. We see that the interest is very high also not only on the big corporates which have signed the first big VPAs and which are still quite active, but also smaller companies are now looking for supplier of really renewable energy. They still can opt for renewable energy contracts with the big utilities but they also like I think to have a supplier like we are a very pure player in this sense and so definitely this is something we want to continue to do.

[00:18:03.350] - Torsten

So subsidies like the guaranteed revenue from, by law, was the old driver, now it's PPA power purchase agreements. What's the share currently between, let's say subsidized cash flow and PPAs which is on a business to business level and.

[00:18:24.870] - Mario

It's a difficult question because, in the end, the cash flow from subsidized plants is still higher. Of course the old tariffs are way higher than the price that we see now in the market. At the same time, technology costs back then were much higher so you needed to have that amount for the megawatt-hour to build the plans. Now you need less. So in terms of share the cash flow, it's not that easy. I would say in terms of capacity, we have still three quarters of our capacity, maybe even more, which is subsidized and one quarter of the new recently acquired assets that are on the market in grid parity where an off-taker pays a price in the long term which allows us to have a profitable business and to operate the plans.

[00:19:29.070] - Torsten

So for future wind and solar parks, are the subsidies still relevant for you.

[00:19:33.800] - Mario

Or is it less and less? I mean there are still some countries in which we have schemes in place which we of course look at and there are some special situations which we still could apply for tariffs or buy plans that are subsidized. But we don't make this a condition anymore in the sense that if the plant and the asset fits in our portfolio, we just buy it and operate it without having sort of limitations or conditions on the form of the remuneration.

[00:20:17.670] - Torsten

In which countries are you focusing on when we talk about subsidies and PPAs, what are the most attractive for pure PPA projects?

[00:20:32.550] - Mario

I would say basically all the European countries, the West European countries. We have Italy, Spain, let's say like in the first wave of solar I think also second wave goes from the south to the north. So in Spain and Italy we see a lot of activity both in development, in construction and PPAs. Germany being a very ambitious country in terms of targets is a very important very interesting country as well. France has been historically difficult for us to enter. We have some plans, but it's even more local than other countries, I would say. But definitely it's not interesting countries. Well, the UK also is increasingly interesting. Denmark is a country where we expect good things to happen and we are building up a very nice portfolio of both wind and solar. And I think, yes, we have some plants in Sweden, both wind and solar. So, yes, I would say there are many countries, and we are basically everywhere in Europe, which is good. And again, at the moment, I would say the countries where we see most activities are Italy, Germany and maybe Spain. And the UK is following.

[00:22:09.930] - Torsten

What about Portugal? A couple of times? Plenty of wind on the coast.

[00:22:15.810] - Mario

Yes, Portugal is a very interesting country. The last process I followed when I was still active in the investment team were very auctions based. They were auction-based and the bids were really very low. We don't have yet projects in Portugal. I think in terms of irradiation and wind resource, it's an interesting country. We just didn't manage to really enter it properly so far. But we think this will happen as well. There is a lot of things going on.

[00:23:02.460] - Torsten

And you mention France. It's a difficult market in terms of regulation.

[00:23:08.010] - Mario

Yeah, both. I mean, nuclear power still plays an important role in the energy mix.

[00:23:14.690] - Torsten


[00:23:16.350] - Mario

There have been now recently some announcements and some actions in order to revise retroactively the tariffs that were granted in the first solar plan. So it's a country in which the messages and the signals are sort of contradictory. Third way, I think they will have something will have to happen, but at the same time, they are still very reluctant to move ahead with a lot of decisions. So, let's see. Again, it's something we are we follow, we observe there are some very good French players, actually, that are developing the business and the market there. Yeah, I will see.

[00:24:08.940] - Torsten

Okay. And do you limit yourself to Europe because you think there's enough business for you to grow or with your competence over so many years, you could try to make a hit overseas?

[00:24:25.150] - Mario

We consider that, and we still consider that from time to time. We believe, as I said before, that you have to reach a decent size in order to make a good business in the different countries. And we see a lot of opportunities in the countries where we are already active. So, yes, for the time being, there is basically no need. And again, if an interesting opportunity happens to make a big step, but also, then it would mean buying or building up an important portfolio, then we would do that. But again, for the time being, we don't think that this has to happen. Europe has very ambitious goals and also countries where things at the beginning were happening a little bit slowly are not picking up. Greece is a good example. There's a lot of activities over there. So yes, I think that there will be plenty of opportunity. There are plenty of opportunities in Europe for us to grow.

[00:25:32.210] - Torsten

So you're a company of roughly 170 people, employees. What's the idea? Do you want to take it to 1,000 or do you just want to become more efficient and keep it always below 200? So what's your company's strategy here?

[00:25:47.150] - Mario

We love to be lean. We love to be a small team in which things can be discussed easily, in which we don't have to make a big sort of decision round in order to get things done. So we love that and we don't move ahead in a dogmatic way. We hire people whenever we feel we need them. One thing that's important and I think characterizes us also is the fact that we love to work with partners. We have, for example, the whole Om business, which we believe will be very interesting also in the future. And I will come to that point in a minute. If it's of interest, we are doing it. We are covering it with partners of us, which we have also share a company based in Parma called Stern Energy, which has been working on our plans since 2008 and maybe a little bit later when we entered Italy, I would say 2012. And they have been doing a great job so far. They do it very well. So we don't feel like we need to build up that team internally. We want to have people who are able to engage them at sort of the right level.

[00:27:11.300] - Mario

So we want to understand what the guys do, but we don't need to do that all on ourselves. And so by this, I think we managed to find a good balance. The guys sort of serve a much bigger customer base, which is good because they are forced to be on the market and to be competitive in whatever they do. This is a way that we've experienced as very promising and there's something that we could continue doing also in other areas where we want to grow.

[00:27:46.080] - Torsten

Okay, so with your 170 people, how many gigawatts of production capacity or maybe kilowatt hours do you manage just to get an idea of your portfolio?

[00:28:02.490] - Mario

The portfolio grows consistently and constantly, but I think we are now, I can tell you precisely around three gigawatts. We have the recent numbers and figures always on our website, but we have more or less 3 capacity solar plus wind. And on the AG site I told you that we are also managing plans for third party investors on the AG. We own 2.3 gigawatts, which is a nice portfolio. Again, we will want to grow it more, of course, but it's a good base.

[00:28:53.000] - Torsten

Yeah. So for the future, PPAs will be that the dominating schemes are maybe you want to outline how do you how do you sell your energy, how does it work and what are the specific challenges for you? And maybe I think that's where the aspect of having a portfolio or having a certain size should come in.

[00:29:16.900] - Mario

Right. This is something we sort of understood only in recent years. Let's say it this way. Historically, each plan is considered as an individual SPV, right? We also operate the plans like having them in individual companies. And for the time being, we are still selling the energy sort of individually. Each asset. Of course, we do see that putting them together creates an advantage in terms of output. It becomes more stable and it's also valued in a different way, especially for the future. We are really now considering to building up mixed portfolios, which are then meant to be selling the energy to a certain customer who has specific needs. It will always happen through a PPA in the end. And we still very much love long term agreements because they give us the stability that we need and that our shareholders love. So this won't change. I think the combination of assets could be something that we push further in order to understand and to create portfolios that are, I said before, optimizing the output in terms of megatour, reducing the imbalance costs and stuff like that. We see that it definitely plays a role, how big the portfolio is.

[00:31:04.650] - Mario

Yes. So this is something we are really working on intensively to understand how to do things in the future. Again, given the fact that there will definitely be a substantial stake of long term agreements.

[00:31:20.310] - Torsten

So let's use Amazon Web Services that you mentioned before as one of your customers. Of course they want to have 24/7 electricity. Fortunately they have the strategy to go 100% renewable. How does it work? Of course, you have solar and wind in Spain, where we have only solar.

[00:31:43.720] - Mario

And then we have.

[00:31:47.810] - Torsten

So it's a trivial question maybe for you, but I think it's interesting how this is managed because the sun doesn't shine at night even in Spain.

[00:31:55.680] - Mario

That's certainly the case.

[00:31:58.190] - Torsten

So how do you supply energy to Amazon Web Services in Spain during the night?

[00:32:03.710] - Mario

That's definitely the case. I probably can't go into too much into the details of the contract, but to make it very short and very simple, we still cannot do that. So we don't supply physical energy in a base load form. So yes, we still have the solar profile, which is a matter of fact. But we see that back then customers were sort of okay with taking what the market was offering. I think also from this point of view, customers are becoming more sophisticated, which will force us to become, I think, what I was trying to say before. We will be forced to combine portfolios in a certain way and probably winded. Solar alone won't be enough. We will have to also include the batteries in the portfolio to at least improve. From that point of view, we believe that solar and batteries do match very well because it's short cycles. When the sun shines, especially in the South Europe wind, you usually have longer cycles, a couple of days of wind and then wind goes down. So it will be a little more challenging. But in general, I think that this and this is a very interesting discussion we're also having at the moment internally, who's going to be in the end able to really guarantee base load.

[00:33:35.020] - Mario

Is it going to be the producers like Encavis? Or is it basically the whole system and the whole Grid to be able to do that? If you look at sort of electric mobility, just to make an example, vehicle to grid is technology which is somehow mature. It works. It has proven to be worked out to be working. There is no mainstream adoption yet, but this is something definite that we have to follow. There will be, as always, players who will specialize on certain aspects. And maybe it's not players like in Cabbage who have to specialize in delivering base load. Maybe again, it will be a combination of different parties, but in the end guarantee that energy is available. Twenty four, seven, and the amount that is needed.

[00:34:27.670] - Torsten

So Amazon, they have right now multiple contracts. One of them is just you, and for the night time they have actually from someone else, right?

[00:34:40.880] - Mario


[00:34:41.580] - Torsten

Okay, so the guarantee of origin business is then not relevant for you because you just sell what you've got. And at this point you don't want to be a 24/7 energy supplier. Buy and resell electricity, for example, hydro from Norway, just to make Amazon in Spain happy to have them, to have them, to supply them with 24/7 energy.

[00:35:10.690] - Mario

Yes, I mean, there are players and there is the option for a place like in Campus to deliver base load energy, to become the party. Of course, then we would have the issue of buying energy when we are not producing it. Right. Because in the end, what we don't produce, we have to buy. Again, this is something that some players do already. We are careful. We are careful, especially during these times where we see high volatility in prices. It could hit you hard. We've seen some things sort of going also the wrong way last year, I think 2021. Yes. In Texas. I think this is also something that is publicly available. We are making up our minds. Theoretically, everything is possible practically. Again, given also our risk profile, we have to be very careful when we consider having also a different role. From this point of view, for the time being, we feel very comfortable in managing the positions that we have sort of that we produce. We feel less comfortable in buying energy that we don't produce from our assets and combine it with our assets in order to deliver it to the customer.

[00:36:26.980] - Mario

This is something that we are maybe we'll have to get there, maybe not. It's ongoing discussions. We will see.

[00:36:41.470] - Torsten

Okay. For my private household, I'm a customer of Natural, I'm sure you know them. So they supply me with electricity at night. They do have their own wind and solar farms. So they obviously are trading energy. Right. So they must buy and resell the electricity. So this is exactly the step which you are considering, but haven't done yet.

[00:37:17.910] - Mario

Definitely we're also not active on the exchange, on the market. We use service providers to sell our energy on the exchange. But theoretically, yes, again, practically not the case yet. And at first all interesting. Again, I don't know. They guarantee you 100% of renewable energy. 100%. Not green washed, is it not greenwashed? I don't know how the company works.

[00:37:49.240] - Torsten

I can't measure it. Right, but maybe they should have external advisory boards and they make a big effort to prove that they are 100% renewable.

[00:38:04.330] - Mario

Yes. And this is something that is also again there are different definitions, I guess in the end, and again, I don't know, not sure, maybe they do things in the best possible way, but in the past there was a huge discussion about companies buying the guarantees of origin that you meant before, that you mentioned before, just to basically show that the volume in the end that they bought is covered by enough guarantees of origin, guaranteeing you the green energy source, which again is not properly correct. Overall, yes, you can prove that you've delivered enough guarantees of origin, but at night, as you said, solar plant simply cannot produce energy. So yeah, it's not a very easy thing, I think. I don't know at the moment how it works, but I also have 100% and I've also not really looked at the details of the bill. But yes, the question is a good one actually would have to be asked to the guys.

[00:39:15.670] - Torsten

But that's an important issue aspect right, of the industry, those guarantees of origin. When I learned first about it, I was surprised in a way. So you basically can sell a kilowatt hours, the physical energy, but you can also sell that guarantee of origin. You can sell the greenness of the queue separately. Right?

[00:39:44.430] - Mario


[00:39:45.020] - Torsten

And that's pretty mind-boggling in the beginning. Then it makes sense. But of course it's kind of a virtual deal, right. And so then the question come in comes in in the about transparency, right?

[00:40:00.770] - Mario

It makes sense because in the end, once the electrons are fed into the grid, they don't have a color anymore, you cannot distinguish them anymore. Powers, power. Right. So basically just being able to prove that you have fed into the grid a certain amount of megawatt hour produced by renewables is itself a statement. And if you say basically I'm taking the energy out of the plug and I have the certificate that it comes from renewables, you match them and you're fine. And this is why increasing an increasing amount of number of companies want to also be able to point out to know which asset is providing them energy, so that they know at which time of the day, at which hour of the day they have taken a certain amount of energy. And it sort of opens the discussion how to prove and which assets to point while the renewable asset is not operating. So, I don't know, but it's coming. And the transparency issue is a big one and there is an increasing need for transparency. And I think this is a good thing, by the way, because it pushes everyone to be simply more open and more transparent.

[00:41:25.540] - Torsten

Yeah, definitely an aspect to watch, I think, because since it's such a virtual digital business, I think to watch out for fake goos, I would imagine must be super important so that we don't run into the wrong direction here.

[00:41:50.870] - Mario

No, I think what does it mean fake? I mean, the GOs are issued by sort of reputable authorities. So you know that basically there are no fake circulating around the ways which use you make out of it.

[00:42:11.030] - Torsten

You mentioned storage. Obviously when as renewals become produce more and more energy and avoid this issue we just talked about, storage is relevant. It costs coming down crazy because of the increased volume. So what's your take? How do you position yourself? You mentioned the issues as a battery owner, you're not producing, but you're supplying in a way. So it's kind of a funny situation. I think there's also legal issues around it if you are a utility or not. So can you outline the complexity of running a business on storage?

[00:42:57.590] - Mario

Yeah, as a matter of fact, it is a very complex business. You have multiple revenue streams on the solar and the wind farm. It's easy, you just produce the energy and you sell it right. The batteries, you can provide different services to the grid or you can just do arbitrage sort of loading and unloading whenever it makes sense. You can do this with longer cycles. You can do that for shorter cycles also to reduce the imbalancing costs. So it's really a complex world with different uses of the assets. And still we have not made our first investment. We have been looking at tons of opportunities over the last years, both in the long term, sort of by logging in long term contracts for the use of a battery with traders and suppliers. We have also looked at short term usage of batteries and I think we will be ready to move very soon, mainly given the fact that the volatility is increasing and we don't expect it to go low in the long run, to be lower in the long run, first thing. And secondly, because the technology costs, as you said, are going down.

[00:44:25.900] - Mario

So I think we won't have to wait much but for the time being, to be honest, the cases, the business cases were not good enough. We could have done something just to show that we are working on that area. But we are still very conscious and cautious when we invest our money, we want to invest it well. And so as long as we don't find any convincing business case despite again, it would make a lot of sense for the grid and in general for the system. We have not placed the bet yet.

[00:45:12.590] - Torsten

Yeah, I guess it shouldn't be a bet when you want to make exactly save money. Here you mentioned the O and M business, so operation and maintenance of solar and wind parks and you have a share in the Italian company you mentioned in the subsidies. Yes, it's a no subsidy, it's an independent company.

[00:45:34.350] - Mario

Which has different headquarters in Italy, but it has subsidiaries in the countries where we are active in the Netherlands, which I did mention before. Sorry, Netherlands, Italy, of course, Germany and the UK, they are maintaining our plans.

[00:46:00.250] - Torsten

What's interesting about the business in terms of technology or the business model? Why you mentioned that it's such an interesting sector of the industry.

[00:46:11.930] - Mario

Yeah, for many years the om was looked at like a very sort of simple business with low margins, something just that needed to be done right. The availability of the asset of the plant should have been as high as possible and a bad om would have reduced your profitability but you could have survived. Now we see that om becomes an integral part of the value chain because first of all, you need to have things that I mentioned before availability, reliability of the plan, blah, blah to a certain price in order to be competitive when you sell the energy. And this is the most important thing. We are seeing that in the end these assets age also the solar ones. You might think that once you build the plant you can leave it like this for the next 50 years and this is not the case. First thing you see that there are some things to be done also some substantial activities to be performed on the assets. Mainly since we have relatively young assets, the issues we have are still covered by the guarantees but still you have to spot the degradation issues you have to claim in case against the module suppliers and you have to then substitute modules or inverters or whatever.

[00:47:50.410] - Mario

But even without that, we have now realized that after 10, 15, 20 years the technology improvements allow you to use the same area in a different way by simply the increase in efficiency of the modules allows you to have the same power you used to have before on a much smaller area and that you can gain surface to extend your plant which then wouldn't be subsidized, but it overall gives you a bigger capacity. And we've done this in a couple of projects. One of these stories has also been published on LinkedIn, where we basically showed that all of a sudden we were able to produce more energy out of a certain area that we had used for the last ten years with certain capacity. And all of these, the ability to really understand what can be done, where is something that can substantially help you to do. And we are again seeing that by intervening on the single assets, a lot of value can be generated, a lot of value can be created. And so we believe that this is definitely something that will play a role. It's a growing market and it will continue to grow even if no capacity is sort of built out.

[00:49:26.490] - Mario

Right. Because you can only construct the business or the plant once you build a new plant, but you have to learn to maintain it for the next 20 years. And again, the maintenance activities are significant. So it's the growing market, even in case the new build slows down, which is not being the case and not expected so far, but that could be an opportunity and could go even further. I think that knowing exactly how the plant is performing could also improve the quality of forecasting for, say, the activities on the market and the reliability of the supply. So there's plenty of factors, plenty of aspects.

[00:50:19.830] - Torsten

When I try to structure it for myself. So one thing is really the importance is to spot faults in the solar parks, wind farms. So you do observe faulty modules. What's the key? And the second part would be repowering. So you actually replace solar modules with more efficient ones. And the third part is really the forecasting. So that gives you a better your sales team, I guess, gets better pricing. If you have less volatile forecast on the first part, the degradation of faulty components, what are the key issues that you observe? Do you have a kind of a pareto analysis? Is there a classic aspect and what do you do against it?

[00:51:14.140] - Mario

Yes, you basically start realizing that the performance ratio is going down, which means the relationship between the amount of energy that the sun is full of giving us and the amount of energy that the asset is converting into electric energy. This is something, again, that has to be monitored constantly. There are many factors that have an impact on the performance ratio. And this is where a good provider sort of makes a difference. They are able to spot in advance and to sort of anticipating the whole process of claiming they are supporting you in the claims by doing the right analysis on the ground on the modules to convince the manufacturer that this is a warranty case. Basically, it's about not wasting time before intervening, not accepting, or not sort of ignoring the fact that the performance of the plan is slowly, slowly going down.

[00:52:18.610] - Torsten

Is it easy to claim faulty modules. What's your experience? How do you go about it? Do you need a third-party auditor to measure individual modules?

[00:52:29.470] - Mario

Yes, very often you do need them, laboratory analysis. But in general, we have been lucky enough to have big players providing our modules, also applying us to the modules. And big players usually are also very sort of serious when it comes down to or honest when it comes down to claims. Again, you mentioned before a couple of companies that produce thin-film modules that are not on the market anymore. On that, it would become difficult to get replacement.

[00:53:13.060] - Torsten

Yes. Okay. And on the repower section, that's interesting. So you really take out the solar modules, which have an age of, let's say, ten years, and you put in the ones with 30% more efficiency. What do you do with, let's say, second hand modules? Is there a specific market for it or how do you go about it?

[00:53:43.580] - Mario

Yeah, before that, please allow me to differentiate between repowering and revamping, two different terms. When you repower, you usually increase the output and the capacity of the plant by using the same area. When you do the revamping, which is what we normally do, into the subsidies, you keep the power as authorized, as qualified for the subsidies, and you just use a smaller area or a smaller surface. And basically the area, the surface that becomes free, you can use for a new land, as a matter of fact, which you can build and sort of sell the energy, but which is not subsidized. Right. Only refers to a certain capacity which is fair. Otherwise it would be interesting. And yes, the whole question about the old modules is, as a matter of fact, also an interesting topic. There are some companies that are focusing on the recycling of the modules, and I'm very curious to see what they will manage to do. For the time being, we use partners and third parties who manage the whole process of sort of taking them, certifying us that they are going to deal properly with them in case recycling them according to the best practices or selling them on the secondary market after being sort of restored to a certain point to become operational again.

[00:55:36.640] - Mario

This is something that we enter into an agreement with companies that specialize on management of these modules. And then we're out again. In Italy, the experience we've made was mainly with people who have been recycled.

[00:55:54.470] - Torsten

Because this is going to be a huge market. Right. I mean, right now we look at an age of the industry of, let's say even ten years in terms of volume, significant volume, which is close to zero in terms of cosmic times. Right. And that's, I guess, what we actually talk about. Right. So this is going to be a very important aspect of the future. How do you do recycling reuse of those solar modules? Interesting, you mentioned that aspect of vehicle to grid, which is related to storage. What's your hope? What's your forecast on that?

[00:56:49.330] - Mario

Again, it's a very interesting technology and I think it will become mature for mainstream adoption, definitely for us, as it's way too far away from our business model so far. So it's really something that we follow individually because of personal interest, not as a company, but I think that also in the area or in the industry or in the sector of renewable energy, technology will provide solutions that we cannot think about at the moment. I'm pretty confident about that. We think that the ability to process data is going to provide completely new scenarios, new solutions, new approaches, and it's something we are very fascinated by.

[00:57:57.210] - Torsten

Let me jump to another topic. You own actually those assets, right? So you need lots of funds to buy them. So I would expect that mainly pension funds who are interested in a super safe, non-volatile cash flow and also conservative, but yeah, secured profit could be your key investors, am I right or where does your money come from for your big solar park?

[00:58:30.750] - Mario

Yeah, we're different. This is something that our CFO could talk about for hours. We have different ways of raising funds. The more traditional one and still one that plays an important role for us is the funding at SPV levels through project finance. SPV sort of at the level of the individual project or plan. We have dedicated vehicles, special purpose vehicles, It's companies, more companies where you can ring-fence the risk. Somehow you can raise debt in order to then construct the plant and they still play an important role then. We are also increasingly having sort of fundraising, basically. Instruments at corporate level is also something where basically encourage AG, places an instrument and raise some funds. And ultimately we have not done that for the last years, but still, it still isn't an option for us being a listed company to just make a straight capital increase by issuing you shares. So we have different tools and instruments that we can use. And I think we've been also, from this point of view, very balanced in using them so far. This fortunately has not been a constraint for us in the last years and we don't expect this to be a constraint in the future because I think we are very well positioned to raise capital.

[01:00:21.560] - Torsten

Yeah, I looked at your publicly-traded company and I look at your stock and when I go down back to three or five years, your stock has increased by a factor of roughly three, I would say.

[01:00:41.630] - Mario


[01:00:42.270] - Torsten

While the German ducks index or any other tech ducks and ducks or whatever just grew by 12%, right?

[01:00:49.100] - Mario


[01:00:49.620] - Torsten

So you do super well. Why do you think is your stock so interesting and is it similar for other competitors of Encavis?

[01:01:01.730] - Mario

Yeah, more or less, yes. There are differences, of course. We've been performing, I'd say extremely well among the best ones. I think this is given by manufacturers. I think we've been running the company very well, we've been growing our business over the last years the way the market was expecting. We have a lot of ambitious plans sort of outstanding in the sense that we want to do much more and this is also publicly available but of course the industry itself, renewables have become an important topic. I think that again the maturity of the industry has played also a role in attracting more funds and more capital. At the beginning it was something more like and even back in 2013 when I started nine years ago at capital stage renewals were something these guys think about the environment but we'll see what they can do and I think that history has proven us right both in terms of again maturity of the technology capability to really deliver substantial amounts of power to the grid and enough energy to become significant as a supplier and I think also people have understood that we have to find sustainable ways to produce the energy that we consume.

[01:02:47.580] - Mario

I don't think it makes sense to reduce I mean of course by increasing the efficiency it's important to reduce your overall consumption but progress is something that all of us strive for, we want to use technology, we want to sort of be mobile somehow but it has to all happen in a sustainable way. I think people have understood that. Again, I think that the industry is doing great and it's just the beginning. To be honest I think I'm really enthusiastic when I think about the future. I think the best is really yet to come. We're just the very beginning. It's going to be huge. Yeah, it's going to be good for all of us.

[01:03:31.670] - Torsten

Yeah, excellent. So another jump in the topics. You need talent to build a good company and obviously you have managed to do that. How do you do it? How do you pick talent in the job interview? Do you have a special methodology or will you rely on your gut feeling? What's your way to do it?

[01:04:03.250] - Mario

It's an interesting question because the war for talent is on. We see that it's not easy to find good people. At the same time we are very happy with our team. I think it's one of the key success factors for us in the past and will also be the quality of the team which is really good and really high and I think that what we've done successfully in the last years is we've been open to also hire people who didn't really primarily come from this industry because it is somehow still a young industry and it's not easy to find sort of people with a lot of experience willing to move. Now it's happening, you see people building from the competition who apply for new positions here it is helping us from this point of view to also acquire experienced people. But in general we were in the past very open for cross industry sort of applications and this has been important. And during the process I would say in the end each manager has a little bit of his own style. I try to go into the meetings and into the job interviews with a very clear understanding on the hard skills.

[01:05:38.970] - Mario

And this is usually also we have a two stage process in which during the first stage we understand how solid the skills are and the second one where I usually join is where I try to understand the motivation the person that's sitting in front of me. Yes, I would say this is then when I basically when I think that I've been lucky enough over the last years to sort of pick right people, I know that there is a famous bias. Probably we have not hired people that are very good as well. So seeing somehow or experiencing the success that a former applications at encounters do have somewhere else is always sort of yeah, it's always a little bit tough because you realize man, you may have lost exactly, you could have hired somebody really valuable. So I'm not stating and suggesting that we are perfect in picking people, but I think that we've really managed to build a great team over the last years. And I think it's a combination of looking at really both things, the skills that are the basis for everything, but also the personal fit, the cultural fit, which I do consider being very important, the attitude, what I look after, the ability in few words, the ability to work hard in a passionate way, but also to have a lot of fun.

[01:07:25.510] - Mario

And I think this is what is really one of the key aspects of encouraging of the team at encouraging it's a bunch of people who loves to spend also time together and it's very precious.

[01:07:40.910] - Torsten

Excellent. The other question that has established itself as a standard non conventional question for let's say Solar Journey is project management, right? So particularly in technology it's always difficult to predict the time, the budget you require to establish that new feature or build this new feature. For your case it's a little bit different. Right? Because I would assume to a certain extent copy paste. But still a project management is not science, but depends on so many factors. What are the key essences of your project management? To execute in time within budget.

[01:08:28.670] - Mario

Yeah, I mean the most important process for us is I would say the investment process. So when we find an investment opportunity that we like and then the team starts working on it and hopefully then brings it to conclusion by signing the contract, let's say the one process that in theory is the one which is more sort of easy to repeat in the end, it's not exactly that because each project has its own peculiarities and is somehow special. From this point of view, I think that the most important skill and feature and ability is to really be quick and good in communicating. And I think this is also where something where we, we really became good at over time. At the beginning, the investment team, when I was still working in the investment team, it was basically managing everything. So it was negotiating the contracts. It was a little bit of the technical aspects of the different contracts, especially the O and M. If the plan was already operational. We were looking at the financing agreements, we were trying to understand. We were looking also, of course, in close cooperation with technical guys on how the overall performance of the assets was doing.

[01:10:10.450] - Mario

And this became too much. At the beginning was all right. Again, when the industry was not mature enough, we could do that. But we realized that we need to have specialists in the team. And I would say over the last five years we've built very good teams that work together. When a project becomes sort of active and when we sort of press the button that we want to move ahead. Yes, the investment team has become in a certain way still the frontman. The team or the guys are still the ones who negotiate the contracts. But again, in combination with a bigger team and here communication is key. It's really key. The ability to basically bring everyone to the same level, to understand what exactly is tackled at a specific stage. We have trained our team and some colleagues in project management. But to be honest, I believe that the biggest learnings and the biggest way to learn this job is by just doing it sort of on the job and by having the openness to give and receive feedback in a very straight way. And I think from this point of view we're also very good and we are constantly improving.

[01:11:57.420] - Mario

Constantly improving.

[01:11:59.490] - Torsten

Excellent. Thanks a lot for that input. Last question, as always, you mentioned you are excited about the future, just like I am. And I think there's plenty to do and solve and contribute to the good. But what's the key essence that is required to bring solar and wind the industry to the next level?

[01:12:31.090] - Mario

The will. Only the will. I think that everything is available. Again, technology is there. I think the support from the population is also there. I think that by now in Europe, the majority of the people want renewables to be built out. I think it's really about the political will to allow that to speed that up. We are still looking at a lot of projects that are delayed due to bureaucracy and a lack of a clear framework in which things should happen. And this is the most frustrating aspect for me. I think that the industry and the people are much further, much more ready for all of these to happen. Then I would say politics is, and this is what is needed. I remember also from my time back then as a project developer, maybe that's why I'm wanting this specific aspect out. Back then, I really had to navigate in a jungle of unclear rules and unclear regulations, which never gave me certainty or uncertainty on or actually ever confirmed that this project will be built one day, nor allowed me to understand under which circumstances this project would have not been built. Right. So it was really always this strange feeling of, is it going to happen?

[01:14:25.830] - Mario

It's not going to happen. And I think this is what's slowing down things at the moment. There is enough capital. There is, again, technologies there. Yes, we do have some issues on the on the supply chain, but it's it's I think it's temporary. I think, yes, we will have some issues on the grid, but technology is moving ahead at impressive speeds in all directions. The batteries will be ready when we need them. So I don't think that this will be the issues. I think it's really about making it happen, about defining a clear framework where which assets should be built, wind or solar, and just do that.

[01:15:04.790] - Torsten

Excellent. Mario, thanks for sharing your insights and your enthusiasm. Wonderful. Wish you all the best. For you, but also for encourage thanks for coming onto the show.

[01:15:22.110] - Mario

Mario, thank you very much. Thorpe it has been a great pleasure to be here with you.

[01:15:27.080] - Torsten

Thanks. Bye.

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